EU targets lawyers and accountants in tax-avoidance clampdown

Brussels is preparing to crack down on accountants and lawyers running tax-avoidance schemes in response to the Panama Papers scandal that showed how the rich and powerful hide their money.

Jean-Claude Juncker, the European commission president, told MEPs on Tuesday that he would table a draft law before the end of June that aims to shed light on experts who help clients exploit tax laws and shift money to offshore tax havens.

Lawyers, accountants and other financial experts who devise complex tax avoidance schemes were a “real problem”, Juncker said, adding: “You can’t simply hide behind lawyers’ confidentiality. We are working on that. There is progress being made.”

“The trust of our citizens has been seriously shaken by the revelations and there is a lot of indignation levelled at the corporate tax system, which is seen as unfair and insufficient,” Juncker told MEPs.

More than halfway through his five-year term as commission chief, Juncker is seen as the poacher-turned-gamekeeper of tax avoidance. Days after taking up his EU post in November 2014, he was hit by revelations that Luxembourg – the country he ran for nearly 20 years – had been allowing tax avoidance schemes on a massive scale.

Juncker served as Luxembourg’s prime minister and finance minister from 1995 until 2013, a period when the country helped water down EU efforts to tackle banking secrecy, according to documents from the time.

During Tuesday’s 90-minute meeting with MEPs, he was asked to explain his role in weakening EU tax laws agreed in long-ago ministerial meetings.

But even his sternest critics believe Juncker has changed. “You have turned from Saul to Paul on the road to Damascus,” said Sven Giegold, a German Green MEP. “But citizens want to have a clear statement of responsibility about what you did in the past. That is what is damaging your credibility and I think that it is a shame because you are making very positive progress.”

Juncker batted away suggestions he had something to apologise for. He said: “I was a minister at the time, I wasn’t responsible for financial and business issues, so I never discussed fiscal measures with a company. It is a clear principle in Luxembourg.”

He also rejected suggestions of a Damascene conversion, although he acknowledged the system had been unfair. “I believed in tax competition, which is a principle of the [EU] treaty and I still believe in tax competition, but I am focusing my attention now more on fair tax competition,” he said. “It has to be fair and it was not always fair.”

Juncker, who once joked that bank robbers could make the best police officers, has presided over a multi-pronged attack on tax avoidance since arriving in Brussels. Large multinational companies will have to disclose more information about taxes and profits, although precise details are still being hammered out. The commission has investigated state-supported tax avoidance, looking into low taxes paid by McDonald’s in Luxembourg and Apple in Ireland.

At the end of the year, the EU will publish a blacklist of tax havens in an attempt to name and shame countries to fall into line with international tax standards.

The British government has not spelled out which EU tax laws it will keep, if any, after Brexit but has floated the idea of abandoning a European-style social model. Under the coalition government, the UK signed up to several international initiatives against tax avoidance. Officials in Brussels argue the EU regime is more rigorous because it relies less on voluntary standards.